ChartWatch Markets: Bull market vs bear market? Nasdaq, Bitcoin, Ethereum... Which falls into which category?

In today's edition of ChartWatch Markets, we'll be covering the technicals for:

• Nasdaq Composite

• Bitcoin vs US Dollar

• Ethereum vs US Dollar

• US Dollar Index Futures (Front month, back-adjusted) ICE

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Nasdaq Composite Index

Nasdaq Composite Index chart (click here for full size image)

Two in a row has become three in a row. The supply continues to linger around 24020!

But look at the last candle, smaller body, modest downward pointing shadow – the supply is losing both motivation and firepower! Can I surmise (if you’ll let me), that the demand-side remains in control here, and that MOTN (More Often Than Not) given a set of technicals like in the chart above – the price will continue to rise.

This is what I love about technical analysis – each day we get another piece of the puzzle – and if you’re doing it right (i.e., focussing solely on D + S = P), then there’s a new snippet of market consensus.

Just look at the last candle and ask yourself:

• Who’s in control? 🤔

• What’s their degree of that control? 🤔

• How motivated were they? 🤔

Candle colour, candle length, close near the high, accompanying volume. The building blocks of D + S = P.

Then, work that into the price action (relative positioning of recent points of demand and points of supply), and trends (ribbon colour, price above or below ribbon, ribbons acting as dynamic demand or dynamic supply?).

The rest is noise (news, experts, your feeble attempts at “research”)! I’m sorry to be the one to tell you this, but:

1. There’s nothing you know that’s worth knowing that the market doesn’t already know

2. There's nothing you can do to change the outcome anyway – it’s going to happen as if you never existed…

Awww…. That’s not very nice Carl… are you implying that I’m completely useless and redundant in the price discovery process… like it’s only what the market does that matters and not what I think or believe?

Yep, that’s exactly what I’m implying!

Now, don’t get me wrong, I’m sure your mum was correct when she said you’re a beautiful little snowflake and what you think and do in life is going to matter…

But this is the markets. Markets take no prisoners, they don’t do favours, and they chew up and spit out investors who think their opinion matters!

Get with the program: or expect to get masticated!

The “program” for the Comp remains demand-side control. Yes, it’s worth watching closely how the next few candles fall because the last few hints at some degree of supply-side involvement – but considering the point of why we look at this chart is to determine possible portfolio risk capacity – there’s no clear reason yet to deviate from the assumption of total demand-side control.

View: I am FRP (Full Risk Position corresponds to a 100% allowable capital allocation limit for US stocks based on my personal risk management model).

Key levels: 23120 is the closest point of demand, the price should not close below here if the demand-side is in control of the Comp's price; a close below the short term uptrend ribbon (presently 22900-23180) will nullify the short term uptrend = ⚠️

Bitcoin vs US Dollar

Bitcoin vs US Dollar (click here for full size image)

We don’t often cover Bitcoin vs US dollar – but not out of lack of desire or interest – simply that it’s been in a trading range for the last 5 months.

This might not be the case going forward, but it might be for all the wrong reasons as far as bitcoin enthusiasts might be concerned.

My model doesn’t care about narratives – so the analysis here says nothing about whether Bitcoin is the most wonderful development in finance since the invention of fiat currency or not! It simply attempts to convey the balance or imbalance between demand and supply in market using trends, price action, and candles. Let’s investigate those for the Bitcoin price:

• Consistent with demand-side control = ✅

• Consistent with supply-side control = ⚠️

1. Short and long term trend ribbons: ⬇️ / ↔️, short term downtrend widening (getting stronger) vs long term trend contracting (getting weaker), the price is below both ribbons and both ribbons are acting as a zone of dynamic excess supply = ⚠️.

2. Price action: Falling peaks and falling troughs (i.e., demand removal and supply reinforcement) = ⚠️.

3. Candles: Supply-side control (i.e., black-bodied candles and or upward pointing shadows) = ⚠️.

⚠️ + ⚠️ + ⚠️ = Make of that what you will! Monday was the first close below the long term trend ribbon since March – and while that downward run only had a few thousand bucks to run, it still foreshadowed further weakness.

View: My model requires ZRP (Zero Risk Position is my way of saying – I can’t see any reason to allocate risk to this trend. You could also consider this to be a -R scenario by default, i.e., I prefer to reduce any risk that happens to be in the system towards achieving ZRP). Further, the close below the long term trend ribbon qualifies the Bitcoin price action as an aggressive short setup, i.e., "-R".

Key levels: 103604-105159 is the closest zone of demand, the price should not close below here if the demand-side retains any control of Bitcoin's price; it is increasingly likely that the short term trend ribbon (presently 110600-111600) and the long term trend ribbon (presently 106780-110870) will act as zones of dynamic supply.

Ethereum vs US Dollar

Ethereum vs US Dollar (click here for full size image)

The similarities are obvious here. Ethereum's chart resembles the classic "bouncing ball" pattern, where each bounce in the price – like each bounce of a ball dropped with forward motion – is progressively lower.

Imagine the ball is dropped onto a table... it will bounce along that table, finding support at the table top until... eventually... there's no table top left to encounter. The ball drops quickly from that point!

View: The "edge of the table" in this analogy is 3355-3467. Trends, price action, and candles are the same as Bitcoin's, and therefore my model requires ZRP and or -R towards achieving ZRP. A close close below the long term trend ribbon would qualify the Ethereum price action as an aggressive short setup, i.e., "-R".

Key levels: 3355-3467 is the closest zone of demand, the price should not close below here if the demand-side retains any control of Bitcoin's price; it is increasingly likely that the short term trend ribbon (presently 3915-3994) and the long term trend ribbon (presently 3525-3785) will act as zones of dynamic supply.

US Dollar Index Futures (Front month, back-adjusted) ICE

US Dollar Index Futures (click here for full size image)

Just a quickie here to note that the common denominator in both of the above charts is the US dollar as both Bitcoin and Ethereum are quoted in this currency. It makes sense that some of the reason for each crypto's weakness is the strength in the US dollar.

The chart above is nearly the exact opposite, in terms of trends, price action, and candles compared to the above two charts. For me, this chart is an example of an aggressive long setup, bordering on a long turnaround setup should the long term trend ribbon confirmed as a zone of dynamic demand (i.e., a trough is set at or above the long term uptrend ribbon).